Lean Six Sigma (LSS) expert, and SCS instructor, Delina Ivanova, explains how big on-demand companies-such as Amazon and DoorDash- use LSS process improvement methods to meet customer needs.
In the last 100 years, we have seen tremendous change in the way companies execute and scale manufacturing and product delivery processes. In the early 1920s, a personalized customer experience was made possible with the use of people - for example, milk delivery. However, as populations grew and spread over greater distances, these services became more costly and difficult to execute. Eventually our societies reached a point where customization was expensive and inefficient, and standardization, mass manufacturing and centralization of products and services became a better way to control costs and maximize revenues.
Methodologies like Lean and Six Sigma were introduced and adopted by companies like Toyota and 3M to streamline processes, eliminate waste, and reduce errors - cost control was a primary lever in an increasingly competitive market. In the 1990s these synergistic methodologies converged and became known as ‘Lean Six Sigma’ (LSS), becoming even more popular across both production and service industries.
But the world is changing yet again. With advancements in technology, internet companies like Netflix and Spotify have re-introduced the concept of a personalized customer experience - this time, at scale. In the last 10 years, the on-demand product and service industry has grown. Customers are becoming more comfortable with organizations using their data to create personalized experiences, and are expecting better and better products and services.
The COVID-19 pandemic accelerated that growth even more with consumers becoming increasingly dependent on companies like Amazon to deliver custom orders same-day. Others, like Costco, are rushing to catch up and make at-home deliveries available. This change in consumer behaviour has also challenged existing industries, like grocery and restaurants. Organizations like HelloFresh have tackled the ‘eating-at-home’ experience, by enabling custom menu selection and fresh grocery delivery to your door. Meanwhile, DoorDash and UberEats have challenged the pizza delivery industry and provided access to a multitude of restaurants and cuisines.
As you can imagine, with this level of customization, the old ways in which Lean Six Sigma was used (standardization for mass manufacturing), are no longer applicable. For example, it is difficult for HelloFresh or Amazon to standardize processes where every customer’s order is different. But the focus on excellence for these companies remains. Both continue to demand excellence through waste and error elimination. So how can we apply the principles of Lean Six Sigma to the on-demand industry?
1. Understand the customer’s definition of quality and build a product around it.
Personalization requires a continuous understanding of customer needs, and processes which are adaptable enough to accommodate these changes. Continuous improvement in real time can be achieved by creating mechanisms to collect and understand customer feedback and establishing flexibility in processes to adopt new practices - such as new products or configurations - through technology and modular process design.
2. Streamline and organize production facilities to minimize waste and errors.
This includes standardizing processes which are common for all products (for example, printing labels and placing them on shipping boxes) and optimizing other processes such that common tasks are completed at the same time. In a distribution facility, like Amazon, this could include organizing products logically by likelihood of product combinations in customer orders. In the food industry this could include organizing recipes such that those with similar ingredients are produced on the same production line.
3. Use data-driven optimization to maximize output while minimizing cost.
While Lean Six Sigma has always been a data-driven methodology, the use of optimization models is necessary for on-demand industries. These models are rooted in identifying the most efficient method of achieving the optimal output at the lowest possible cost and can inform process design. For example, identifying which products to cluster together to minimize employee movement and ensure customer orders can be created as quickly as possible.
4. Failure management and process control.
Lean Six Sigma organizations improve processes methodically, with a focus on controlling or maintaining those improvements. Lean Six Sigma tools, like a Failure Modes & Effects Analysis (FMEA) can be used to quantify process risks, identify mitigation strategies, and implement control mechanisms to ensure processes are always performing optimally.
Delina Ivanova has 10+ years of experience across management consulting, financial services, and on-demand CPG industries focusing on corporate finance, product management, procurement, data management, and analytics functions. Having led numerous business and enterprise initiatives, Delina brings together practices of effective strategic planning, project management, risk management, and process design and optimization to help organizations achieve operational objectives in line with market evolution. She is a Lean Six Sigma Green Belt and holds a Bachelor of Management and Organizational Studies from Western University in London. Delina is an instructor at SCS, and her course Introduction to Lean Six Sigma Methods starts September 24th.